As noted in the introduction to this volume, common trends among OECD countries do not necessarily entail convergence. Thus the absence of convergence should not lead us to conclude that there are no common trends. Patterns of wage inequality illustrate this point. In virtually all OECD countries, wage differentials became more compressed in the 1970s, and this trend abated in the 1980s. In many countries, wage inequality has increased over the past 10 to 15 years. Yet the extent of wage compression in 1970—85 varies greatly across countries, and so does the extent of wage dispersion since 1980. Though some changes in relative country rankings occurred, cross-national variations in levels of wage inequality were as great at the end as they were at the beginning of each phase.

Several of the preceding chapters in this volume suggest that wage distribution represents a crucial dimension of the ongoing reconfiguration of wage bargaining, macroeconomic management, and public provision of social welfare in OECD countries. This is perhaps especially true for the Nordic countries, where wage restraint was explicitly linked to wage solidarity in the 1960s and 1970s, but trends in wage distribution appear to be closely related to institutional change in other countries as well. Before we can begin to grapple with contemporary dynamics, however, we need a better understanding of the determinants of cross-national variations in wage distribution or, in other words, a better understanding of how different varieties of capitalism produce distinctive wage-distributive outcomes. While the politics of wage distribution have figured prominently in the literature on the Swedish model, they have been largely neglected by more broad-gauged approaches to comparative political economy.

Labor economists who study wage distribution from a comparative perspective typically end up arguing that institutions matter, that is, that supply and demand factors alone cannot explain observed variations in wage inequality across countries (see Rowthorn 1992; Freeman and Katz 1995; Blau and Kahn 1996; Gottschalk and Smeeding 1997). From a political-economic perspective, this literature is problematic in that it deals with the question of institutional context in either a reductionist or a residualist manner. To the extent that economists incorporate institutional effects into their models, they tend to reduce institutional context to a single, one-dimensional variable, such as the centralization of wage bargaining.